Estimation of real-world market probabilities by the Ross recovery theorem

Ross (2015) developed a recovery theorem with the aim to recover the physical probability distribution merely based on the option prices and discover the forward-looking content from the recovery. There have been studies that intensively discuss the possible extensions and robustness of this theorem...

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Main Author:	Liu, Bingyu
Other Authors:	Nicolas Privault
Format:	Final Year Project
Language:	English
Published:	Nanyang Technological University 2022
Subjects:	Science::Mathematics::Applied mathematics::Simulation and modeling
Online Access:	https://hdl.handle.net/10356/156918
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Institution:	Nanyang Technological University
Language:	English

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spelling	sg-ntu-dr.10356-1569182023-02-28T23:13:01Z Estimation of real-world market probabilities by the Ross recovery theorem Liu, Bingyu Nicolas Privault School of Physical and Mathematical Sciences NPRIVAULT@ntu.edu.sg Science::Mathematics::Applied mathematics::Simulation and modeling Ross (2015) developed a recovery theorem with the aim to recover the physical probability distribution merely based on the option prices and discover the forward-looking content from the recovery. There have been studies that intensively discuss the possible extensions and robustness of this theorem, some of which criticize its practicality. This thesis intends to build an algorithm based on the framework suggested by Jackwerth and Menner (2020) and explores its application on S&P 500 European call options. The results resembles what are presented in Jackwerth and Menner (2020). Bachelor of Science in Mathematical Sciences and Economics 2022-04-27T08:23:03Z 2022-04-27T08:23:03Z 2022 Final Year Project (FYP) Liu, B. (2022). Estimation of real-world market probabilities by the Ross recovery theorem. Final Year Project (FYP), Nanyang Technological University, Singapore. https://hdl.handle.net/10356/156918 https://hdl.handle.net/10356/156918 en application/pdf Nanyang Technological University
institution	Nanyang Technological University
building	NTU Library
continent	Asia
country	Singapore Singapore
content_provider	NTU Library
collection	DR-NTU
language	English
topic	Science::Mathematics::Applied mathematics::Simulation and modeling
spellingShingle	Science::Mathematics::Applied mathematics::Simulation and modeling Liu, Bingyu Estimation of real-world market probabilities by the Ross recovery theorem
description	Ross (2015) developed a recovery theorem with the aim to recover the physical probability distribution merely based on the option prices and discover the forward-looking content from the recovery. There have been studies that intensively discuss the possible extensions and robustness of this theorem, some of which criticize its practicality. This thesis intends to build an algorithm based on the framework suggested by Jackwerth and Menner (2020) and explores its application on S&P 500 European call options. The results resembles what are presented in Jackwerth and Menner (2020).
author2	Nicolas Privault
author_facet	Nicolas Privault Liu, Bingyu
format	Final Year Project
author	Liu, Bingyu
author_sort	Liu, Bingyu
title	Estimation of real-world market probabilities by the Ross recovery theorem
title_short	Estimation of real-world market probabilities by the Ross recovery theorem
title_full	Estimation of real-world market probabilities by the Ross recovery theorem
title_fullStr	Estimation of real-world market probabilities by the Ross recovery theorem
title_full_unstemmed	Estimation of real-world market probabilities by the Ross recovery theorem
title_sort	estimation of real-world market probabilities by the ross recovery theorem
publisher	Nanyang Technological University
publishDate	2022
url	https://hdl.handle.net/10356/156918
_version_	1759854237025566720

Estimation of real-world market probabilities by the Ross recovery theorem

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